Encouraging NRNs Contribution to National Economy is Subject to Investment Friendly Environment and Changes in Conventional Laws and Policies
- शुक्रबार, १७ मंसिर, २०७३
- 6 months ago
Non-resident Nepalese movement in Nepal for peace and prosperity is instrumental. The Non-resident Nepali Association has evolved into a unique global Diaspora and has more than 70 national chapters worldwide. NRNs have been investing their capital and resources in various sectors of the country that includes hydro-power, tourism, bank and financial institutions, agriculture, education, and real estate among several others. The contribution NRN and the NRNA made to nation building work after the devastating earthquake of 7.8 magnitude are self evident of NRN’S love towards Nepal. The NRNA also played an instrumental role in amending the conventional law and policies, making investment environment friendly. Consequently the Nonresident Nepali Act was enacted by the parliament in the year 2008 to motivate NRN to take part in all round development of the country and the Constitution also recognizes the role of NRN from which the country can utilize knowledge, skill, technology and capital for national development and thereby granting Non-residential citizenship. Despite of the commitment of creating investment friendly environment and recognition of NRNs necessity for socio economic development of the country, there still requires various reforms and clarity in laws and regulations that address the concern of NRN from investment point of view or for other legal issues including partition, marriage, property and likewise. In this reference, this interview with young and dynamic lawyer Advocate Saroj K Ghimire revolves around the legal aspects of NRN's investment in Nepal and related issues, where Mr Ghimire also shares his experience that he encountered during his visit to the various States of the USA in an interaction with many NRNs therein.
Could you explain the criteria of eligibility to qualify as Non-resident Nepali ?
The law governing Non-resident Nepali (NRN) in Nepal is Non Resident Nepali Act 2008 ("NRN Act 2008"). The NRN Act has mentioned the conditions of being qualified as NRN. As per the NRN Act a "Non-resident Nepali" is a foreign citizen of Nepalese origin which includes a Nepali citizen residing abroad. The Act covers two types of person as NRN, namely a foreign citizen of Nepali origin and a Nepali citizen residing abroad. The foreign citizen of Nepali origin is a person who him/herself or whose father, mother grandfather or grandmother was a citizen of Nepal at any time and has subsequently acquired the citizenship of any other foreign country other than a member country of the SAARC. Likewise, a Nepali citizen residing abroad is a Nepali citizen who has been residing in any foreign country for at least Two years by doing any profession, occupation, business and employment except a Nepalese citizen residing in a member country of SAARC or Serving in a diplomatic mission or consulate situated in a foreign country under the assignment of the government of Nepal and doing study in an academic institution situated in a foreign country. Hence, NRN's definition is broad to include persons of two categories person by status and number of days of residence abroad as mentioned above and I have drawn my response to the NRN of first category in the subsequent answers of your queries
Could you explain how the Constitution of Nepal 2015 has addressed the concern of NRN movement and recognized the importance of NRN and their investment necessity ?
The recognition of NRN and significance of movement of NRN under Non Residence Nepali Association in Nepal has always remained instrumental since 1990s. The Constitution has clearly articulated the importance of NRN's role for the overall national development by the constitutional recognition of their status as Non-residential citizen. This recognition is the evidence of their importance to Nepal. Recognizing the significant role of NRN in national economy, the Constitution under Article 12 intends to utilize knowledge, skill, technology and capital of the nonresident Nepalese in the national development.
In addition, the Constitution has also recognized various rights and status of NRN. The Constitution guarantees non-residential citizenship to NRN. Despite the anticipated dual citizenship for the NRNs, the new constitution came up with new and less controversial mode of dual citizenship. Article14 of the Constitution articulates that Non-residential citizenship may be conferred to the NRN. It says that the person who has acquired citizenship of a foreign country and residing in a country other than a member of the SAARC and whose parents were citizens of Nepal by descent or birth and later on has acquired citizenship of the foreign country, may be conferred with the non-residential citizenship of Nepal entitling them to the economic, social and cultural rights as provided for in a Federal law. The Constitution thus grants NRN to enjoy economic, social and cultural rights in Nepal by having non-residential citizenship but excludes political rights.
As you said, the Constitution of Nepal excludes the political rights of the NRN, what is mean by political rights and what could be the reason for such exclusion of NRN ?
There was no reason framed for such exclusion of political rights while drafting the Constitution. The Constitution excludes political rights of the NRN though continuously demand we
remade from the NRN to have this right in the constitution. The exclusion of political rights includes deprivation of adult franchise, to participate and elect in the electoral process, to participate in the political matters, to hold the position of constitutional bodies likewise. Except to the political rights, virtually there is no differential treatment between the citizens and NRN. However, regarding the exclusion of political rights, the possible reason could be the allegiance towards the country. The right might not have been granted on the ground that there could be division of loyalty in the critical time to the NRN regarding their allegiance towards the country of their residence and Nepal and the Constitution makers may be under the impression that the politics could be guided and funded by NRN. In addition, exercises of political rights are excluded in other jurisdiction except to those countries that has adopted dual citizenship. Hence, apart from this, there are no differential treatments to the NRN.
As you are providing legal advises for many NRN on various legal matters, could you highlight what are the common legal issues NRN consults and about NRNs investment scenario in Nepal ?
I had several opportunities to advise many NRN in the matters related to investment, matrimonial, partition of property, inheritance, transfer of property and immigration. Regarding NRN's investment, firstly I would like to state the overall scenario of migration. Migration of Nepali to foreign country has largely accelerated in recent decades. There is an estimation that about 3.5 million Nepalese working in the Middle East and other East-Asian regions. There is an informal estimation of 600,000 Nepalese permanently living in North America (US and Canada), West Europe, Australia, New Zealand and other developed countries. Remittance alone invites $ 6 billion per year from Nepalese workers abroad and which is approx Thirty percent of Nepalese GDP. It means that the Nepalese residing and working abroad is significant both in numbers and their contribution to the national economy.
As per my experience and to the best of my knowledge, NRN have been making investment in various sectors in Nepal. NRNs investment in service sectors has remained biggest attraction followed by energy based and manufacturing industries and some of them are in non-profit making activities. The NRN's investment has created thousands of jobs and facilitated in advancing skills and technologies. NRN have been investing by incorporating profit-making companies or by profit not distributing companies for philanthropic or charitable works. Each year thousands of NRN travel to Nepal with objectives of making investment in Nepal, which means that NRN has taken their home country as potential destination of their investment in various forms and if they decided to make investment, they require informing to the Ministry of Foreign Affairs
How would you evaluate the socio economic contribution of NRN movement in Nepal ?
The NRN movement in Nepal was guided by the vision and with the determination to make the country peaceful and prosperous that led the significance of NRN movement and formation of NRN Association. Without any reservations and for overall economic and social development objectives, NRNs have been investing their capital and resources in various sectors of the country which includes sector like hydro-power, tourism, bank and financial institutions, agriculture, education, and real estate among several others. The instrumental role played by NRN movement to meet the expectations of Nepali people in home or abroad have been finally endorsed in the NRN Act after amending the conventional law and policies, making investment environment friendly. We have witnessed active role of NRN and their associations actively involving in public awareness in various issues like employment, social security, health, education and other provisions regarding foreign employment with an aim to make people aware of challenges who leave Nepal seeking better opportunities. The philanthropic activities NRN carried including establishment of old age home, death funeral house (Kriyaputri Bhawan), hospitals, roadways and drinking water supply are remarkable that has contributed to the socio-economic growth of the country. Apart from this, the support made by the NRNA after devastating earthquake cannot be overlooked to recognize their contribution in the socio-economic side of Nepal.
As you said the Non-resident Nepali Act 2008 (NRN Act) has been instrumental in addressing NRN issue, could you highlight how NRN Act has provisioned for the investment Interest of NRN in Nepal ?
It is self evident that NRN has made significant contribution in Nepal by their knowledge, skill, technology and capital. Nevertheless, their protection and recognition in terms of law was absent prior to the NRN Act 2008. It is, therefore realizing the legal gaps in addressing the concern of NRN, Non-resident Nepali Act was enacted by the parliament in the year 2008 with an objective to motivate nonresident Nepali to take part in all round development of Nepal by enhancing their attachment towards Nepal by framing legal provision relating to NRN.
Apart from this, NRN's investment is one of the expected parts of national economy. The NRN Act with the aim of facilitating investment by NRN defines investment to mean an investment made for any industry or business in order to earn profit and this term also includes any act, to transfer of technology related right, specialization, formula, process, patent, trademark or technical know-how of a foreign origin, or to provide the service of foreign technical consultant or management service under an agreement to be concluded between an industry or business and NRN. Hence to facilitate investment interest of NRN, the NRN Act has dealt with various aspect of NRN that includes the provision relating to registration as NRN and issuance of identity card, its validity, renewal and cancellation. In addition, the Act also confirms the continuation of NRN status even in case they reside in Nepal by making investment or working for the business. Most importantly, the Acts guarantees the investment opportunities, facilities and concession in the investments, visa facilities and taxation. Apart from this, NRN's right of inheritance and transfer of property and formation of Advisory Board in order to advise the government of Nepal for making timely provision relating to foreign investment policy and laws to motivate NRN to make investment and to maintain the good relationship among NRN are worth noting.
Could you explain the area how foreign investment is facilitated by the laws of Nepal for foreign investors apart from NRN investment ?
In Nepal, foreign investment is governed by the Foreign Investment and Technology Transfer Act 1992 (“FITTA”). As per FITTA, foreign investment in Nepal should be in the form of foreign currency or capital assets or foreign loans. The re-investment of earnings from foreign investment also constitutes as foreign investment. A foreign investor can make an investment either in the form of a wholly owned foreign venture (subsidiary) or a joint-venture or in the form of technology transfer. The FITTA permits foreign investors in equity participation up to 100 percent in almost all sectors except telecom, aviation, banking and insurance, and consultancy services relating to accounting, engineering and management etc., where local equity participation is a must. The minimum threshold amount of foreign investment in Nepal is NPR 5 million (approximately US$ 50,000) which a foreign investor must meet to get a Foreign Direct Investment approval from the Department of Industry.
In addition to those direct forms of foreign investment in the form of use of rights, specialization, formulae processes and patents of foreign origin, use of foreign owned trademarks and goodwill and use of foreign technical, consultancy, management and marketing services are treated as technology transfers under the FITTA, which may be borrowed in Nepal by the local industries and businesses. Any foreign investor, who is desirous of making a foreign investment in or transfer technology to Nepal, requires obtaining necessary approvals from the Department of Industry and/or any relevant governmental authorities as per the nature of business, the foreign investor seeks to invest.
Further, the FITTA has allowed foreign investment in various other sectors including manufacturing, hospitals, education, hotels and restaurant, information technology, energy, tourism, mineral resource, agro-based industries, service industries, construction industries etc. In the year 2010, the Parliament enacted the Investment Board Act 2010and formed the Investment Board for facilitating mega projects relating to infrastructure and service sectors in the areas of construction, mining industry, tourism industry and airlines service industry, having a fixed capital of at least Ten Billion Rupees project cost with various modalities including foreign investment and Public Private Partnership.
Could you explain how NRN's investment is treated differently than foreign investors?
The Foreign Investment Policy of Nepal 2015 has classified foreign investors as corporate investors, Individual investors and Non-resident Nepali investors. The foreign investors can only make investment on selected areas that excludes small and cottage industry and industry mentioned in the foregoing paragraphs. However, in relation to the investment by NRN, such restrictions are excluded. For foreigner, an approval is must for their investment, however for NRN there is no approval required to inject their money in local industry unless they make joint venture with foreign investors.
In addition, NRN can register sole proprietorship, directly incorporate a company for profit making or company with an objective of not distributing profits which is not granted to other foreign. Apart from this, I do not see differential treatment on licensing, permissions or taxation to the NRN in comparison to Nepali citizen. The NRN Act thus ensures that a foreign citizen of Nepalese origin who has made investment pursuant to the prevailing law is entitled to run any industry or business as good as a citizen of Nepal. The foreign Investment Policy 2015 has come up with the provision that NRN could make portfolio investment in Nepal upon framing necessary rules whereas portfolio investment to the foreign investors other than NRN is not permitted as of now.
Could NRN purchase land or transfer land in Nepal ? And what is the status of inheritance right of NRN ?
In my interaction with NRNs in Texas, Washington, New York, Virgina and New Jersy, I found that many NRN have been in suspicion and unclear about the protection of their property in Nepal and their inheritance rights. It should be noted however, that there are two categories of NRN status holder under the definition of NRN Act. One those who acquired foreign citizenship and other who has not become foreign citizen yet but defined as NRN by virtue of working visa or permanent resident of foreign country. Hence, they are conclusively Nepalese citizen, and therefore those except foreign passport holder shall enjoy all legal rights same way as Nepalese in Nepal enjoy, and therefore they have no legal problem.
NRN who wish to involve in property transaction in Nepal either in the form of purchase or sale, the current NRN related law suggest to abide by related provision of that law. The prevailing NRN Act and Rules has some ceiling of land to purchase after they become foreign citizen, however procedure are not well spelled out which need to be addressed by amendment. As long as the matter is of the transfer of property, NRN may sale by authorizing power of attorney through Nepalese embassy.
Thus selling seems not complicated while purchase process is still not well regulated. In addition, the NRN Act has clearly articulated that a NRN may purchase the land or other property in order to reside within Nepal for him/herself or his/her own family and may assign (transfer) the property purchased to anyone subject to any prescribed condition. As per the NRN Act 2008, there are five types of ceiling regarding purchase of land. NRN of foreign citizen can purchase maximum Two ropanies in Kathmandu valley, Eight kattha in terai region and Four ropanies in the municipality except terai and Kathmandu valley. Further, NRN may purchase One Bigha of land in the VDC of terai region and lastly NRN may purchase up to Ten ropanies of land except to the areas mentioned above.
As long as the question of inheritance right is concern, this is still a big concern of NRN but the prevailing laws does not bar to acquire such rights to inherit. Hence NRN has the right to inherit the ancestral property and in case the NRN dies, the property of the deceased NRN shall pass on to his/her heir who is a foreign citizen of Nepalese origin and in the absence of such heir it should be as provided by the prevailing law. Hence, neither the NRN nor their successor shall be excluded from the right of inheritance, however to exercise of such right are subject to NRN identity card. It is therefore, NRN should not be worry about the loss of their right of inheritance by merely being a NRN. However, there are not much clarity about the procedures, thus, the situation warrant that the related law be timely amended to prove them with adequate legal assurance of proprietary and inheritance rights of NRN.
Is it possible for NRN to make petition, defend on the case or transfer for property while residing abroad? If yes how would it be possible ?
Yes. NRN may make petition, submit rejoinder and defend the case or transfer the property he/she owns in Nepal in civil matters and some criminals too. This is possible by appointing legal representative subject to grant of Power of Attorney. In some personal criminal cases like divorce, the wife can also grant Power of Attorney to defend the case. The person holding authority is called waris. Such authority can only be granted subject to the certification at the Nepalese Embassy of concerned country. Regarding transfer or purchase of property, the NRN may transfer or purchase the property in same way i.e. via Power of Attorney certified by the concerned Embassy. However, certificate of title (Lal Purja) shall not be issued by Land Revenue Office unless he/she is physically presents. Representations by Waris in criminal cases are not possible except to the case mentioned above.
Are there any other facilities' provided to NRN under prevailing laws of Nepal ?
Yes, there are many provisions that has recognized the privileges to the NRNs and making investment in Nepal. Firstly, the Constitution of Nepal recognizes the importance of NRN and their significance in national economy. The Constitution also guarantees Non-residence citizenship to NRN. The NRN Act confirms that if any NRN resides in Nepal in the course of an operation of any industry or business in a capacity of a director or high ranking official of management or an employee shall not loose his/her status of non-resident Nepali when he/she has made an investment in Nepal or works in other capacities.
In addition, NRN may open and operate an account for the amount earned by him/her in convertible currency, in any commercial Bank or financial institution to carry on financial transaction. Further NRN may make investment in an industry owned by NRN or where there is more than Fifty percent share investment is made by NRN, NRN may invest the amount earned by him/her/it in abroad in foreign country, for any industry or business which is opened for foreign investment in convertible foreign currency by transferring through banking channel. NRN may also repatriate the investment and the amount equivalent to the profit earned there from, in convertible foreign currency. NRN may by immovable property and their proprietary right by partition or inheritance is secured too.
What are the visa facilities available for NRN and is it require for NRN to obtain work permit to work in Nepal ?
Regarding visa facilities, an identity card holder NRN or his /her family or an NRN who has made investment in Nepal may be issued non tourist visa for a period not exceeding Ten years and the period of visa issued may be extended as per necessity. Regarding work permit, there is no differential treatment prescribed in the law where NRN requires work permit to work in Nepal. A NRN may work without any restriction and work permit required and he/she is equally subject to Nepali labor laws.
What are the tax benefits applicable for NRN's investment in Nepal ?
The NRN Act also confirms that no tax shall be levied on the capital amount at the time of investment made by NRN. Further, it provides that no tax shall be levied upon the amount at the time of reception which in sent to his/her close relatives, who is a Nepalese citizen, by a nonresident Nepali for individual use of such person in a sum not exceeding Fifteen Million Rupees in a fiscal year via any commercial bank or financial institution licensed by the Nepal Rastra Bank (central Bank of Nepal) for financial transaction. In addition the Act also guarantees that no tax shall be levied upon the amount at the time of reception which in sent to, any social religious, academic, cultural, charitable, sports or natural calamities rescue related institution established without taking goal of profit, by a non-resident Nepali through any commercial bank or financial institution licensed by the Nepal Rastra Bank. Regarding income tax, the laws relating to income tax shall be equally applicable to NRN if he/she works as regular employee or consultant. The corporate tax of twenty five percent is equally applicable to the investment of NRN however additional tax of five percent are levied for the repatriation of profits derived from Nepal.
Regarding family and property matters, NRN have been facing complexities in understanding the issues regarding the applicability of judicial decision made abroad in the matters related to divorce and property. Could you explain whether Nepalese court recognizes the decision made in foreign courts or not?
Nepalese courts will not enforce judgments rendered by courts of foreign jurisdiction in the absence of any bilateral agreement between the foreign country and Nepal to that effect. Nepal has not concluded a bilateral agreement with any foreign country for the recognition, or enforcement, of foreign judgments. Nepal is not a signatory to the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters 1971. Except for arbitral awards made in a foreign country, Nepalese laws do not accept the recognition, and enforcement, of a foreign judgment in any manner. Based on this background, the Courts of Nepal including Supreme Court has not recognized the judgment given for divorce and exclusion of proprietary rights made in foreign country. Hence, as of now, the foreign judgment cannot supersede is case the petition is made in Nepal by the claimant. However, regarding the arbitral award on business matters, foreign arbitral awards can be enforced in Nepal as Nepal has ratified the New York Convention of Recognition and Enforcement for Foreign Arbitral Award.
What are the investment constraints that are witnessed by you as an Advocate and by NRN while making investment in Nepal ?
Nepal lies between two of the biggest nations in terms of population and economy and is surrounded by four big host economies of Asia including India, China, Pakistan and Bangladesh. China is the biggest host nation worldwide. China today is the largest host nation, not because of its size and resources, rather due to the opportunities and investment friendly laws and attitudes that it maintains all around, which are the instrumental in creating an investor friendly environment and attracting foreign direct investments. Referring to our country, attracting foreign investments in Nepal is quite a challenge. To name few constraints that we have witnessed in investment issues are primarily inconsistencies and ambiguous laws and lack of cooperation and understanding among concerned governmental stakeholders relating to investment for licensing, permission, customs, foreign exchange, labor, taxation, immigration and approvals. Hence law and order situation is frustrating and have remained a major challenge for the operation and expansion of investments. Trade union activities and political donations are the most complicated issue to deal with. Lack of infrastructure, complex geo location and reliable electricity are major challenges too. Inconsistencies of governmental policies and discretionary administrative rulings, decisions and incompetency of governmental authority in investment issues are remarkable. Beside this, lack of trained and technically skilled human resources is compelling investors to depend on the foreign workers that ultimately raise the cost of doing businesses in Nepal. Lack of state support as complained by the investors is another instrumental constraint. The investors often complained that there is virtually no support from the state to protect them from market unfriendly activities, like unhealthy competition and counterfeiting practices. Corruption at all level is other frustrating side of investment. Politicization of trade union and rigid labor law cannot be overlooked while mentioning the list of investment constraints.
At the end, what would be your suggestion for creating NRN investment friendly environment in Nepal?
Nepal ranks 107 in the World Bank Doing Business Index. What this signifies is Nepal has lot to do in easing the doing business in Nepal for all, foreigners, NRNs and Nepali combined. Problems are not associated only how much it is difficult to obtain a permit to start any business but also other logistics that are necessary for operating any business in Nepal.. There are several other hassles. If we look into the World Bank Doing Business Index, we know how difficult it is to invest in Nepal. Therefore opening of broader investment opportunities and investment friendly laws are the key factors in creating an investor friendly environment. As I mentioned earlier, attracting NRNs investment is quite a challenge but not difficult. Simple and positive changes in the existing practices and laws would be instrumental. Though, we can witness reforms and restructuring in governmental departments including laws related to investments and the commitments given by the government of Nepal in international arena are remarkable to buildup the confidence of NRN investors. However, to ensure that Nepal to be the first choice of investment by NRN or other foreign investors, there require changes in various areas that may include in minimizing corruption in terms money, bribery and policy. Further making prompt administrative responses including formation of single point from where the investors get every government services without any hassle. This also includes the minimizing number of steps to obtain license and permits. Many investors face difficulties not only in getting investment permit but also obtaining property rights, getting electricity and construction permit. These hassles must be suppressed to promote investment in Nepal. Also, eliminating politicization of trade union and rigid labor law are instrumental to convince investors.
Apart from this, I was inquired by an/many NRNs about their doubt on their investment protection due to frequent political changes and bureaucratic responses. Ambiguity of laws and policies has facilitated to exercise discretion by governmental authorities and hence rule of law seen to be jeopardize. Law and order condition remained a major challenge followed by lack of adequate electricity and infrastructure. Hence, unless clarity and consistencies on law and their application are not ensured and administrative reforms, structural competence along with an investment aptitude, responsiveness and humility towards investors are not demonstrated by ensuring corruption less mechanism and maintaining ethical and moral standards, legal commitments made to the NRN will be highly ineffective in achieving the desired goal as expected by the constitution of Nepal and other prevailing laws.
(Advocate Ghimire can be reached at email@example.com)
काठमाडौँ, असार १३ । काठमाडौँ महानगरपालिकाले साझा यातायात सहकारी संस्था लिमिटेडलाई पूरक सम्झौताअनुरुप पुनः पाँच करोड रूपैयाँ उपलब्ध गराएको छ ।
काठमाडौ, असार १३ । अमेरिकी विश्वविद्यालयमा पहिलो दक्षिण एसियाली महिला डिनको रुपमा नियुक्त भएकी नेपाली चेली भन्छिन्ः ‘शिक्षा मेरो रगतमै छ ।’
एजेनसी–विश्वमा केही यस्ता राष्ट्रहरु रहेका जुन खानाका लागि चर्चीत रहेका छन् । तर, कतिपय देशमा यस्ता खानाहरु खाने गर्छन् तपाईलाई आश्चर्य लाग्न सक्छ । तपाई विश्वास पनि गर्न सक्नुहुन्न कि यस्तो खाना पनि खान सक्छन् ।